www.vti.se/publications

Anna Mellin

Åsa Wikberg

Inge Vierth

Allocation of user benefits for international freight transports – in cost-benefit analysis

VTI rapport 798Published 2013

Publisher: Publication:

VTI rapport 798

Published:

2013

Projectcode:

201176

Dnr:

2013/0171-7.4

SE-581 95 Linköping Sweden Project:

International freight transports in socio-

economic analysis (CBA)

Author: Sponsor:

Anna Mellin, Åsa Wikberg, Inge Vierth The Swedish Transport Administration

Title:

Allocation of user benefits for international freight transports

– in cost-benefit analysis

Abstract

The aim of this project is to analyse when, if and how a transport cost reduction, following an

infrastructure investment affecting international freight transports, should be allocated between countries

in a cost-benefit analysis (CBA).

In order to analyse this question, the project has been split into two stages. This first stage aims at

presenting a more general picture of how the user benefits could be allocated according to the scientific

literature, how recommendations on this issue are designed in other countries CBA guidelines, and

whether this issue is treated in the planning process of transnational infrastructure projects.

The available, but scarce, scientific literature indicates that the allocation of user benefits can have

substantial effects on the profitability of infrastructure measures. Having studied CBA guidelines and

CBAs of transnational infrastructure projects, the conclusion from our study is that to our knowledge, no

other country has a well-founded allocation method that could be implemented in Sweden.

Finally, the literature does not offer any strong recommendations or straightforward theoretical methods,

with the exception of a first suggestion by Fosgerau and Buus Kristensen (2005).

Keywords:

CBA, Freight transport, Appraisal, User benefits

ISSN: Language: No of pages:

0347-6030 English 35

Utgivare: Publikation:

VTI rapport 798

Utgivningsår:

2013

Projektnummer:

201176

Dnr:

2013/0171-7.4

581 95 Linköping Projektnamn:

Internationella godstransporter i

samhällsekonomiska analyser (CBA)

Författare: Uppdragsgivare:

Anna Mellin, Åsa Wikberg, Inge Vierth Trafikverket

Titel:

Fördelning av nyttor för internationella godstransporter i kostnadsnyttoanalyser

Referat

Syftet med detta projekt är att analysera när, om och hur transportkostnadsminskningar, som följer av en

infrastrukturåtgärd som påverkar internationella godstransporter, bör fördelas mellan olika länder i en

kostnadsnyttoanalys (CBA).

För att besvara frågan har projektet delats upp i två delar, där denna rapport utgör den första delen och

syftar till att ge en övergripande bild av hur en fördelning kan ske enligt den vetenskapliga litteraturen,

hur eventuella rekommendationer ser ut i andra länders CBA-riktlinjer, samt om frågan har behandlats i

planeringen av gränsöverskridande infrastrukturprojekt.

I den knappa forskning som hittats indikeras att fördelningen av transportkostnadsminskningar kan ha

betydande effekter på lönsamheten för infrastrukturåtgärder. Vidare är slutsatsen från vår studie att det

inte finns något annat land som har en välunderbyggd fördelningsmetod som skulle kunna implementeras

i Sverige. Inte heller finns någon stark rekommendation eller teoretiska metoder att hämta från

litteraturen, med undantag för ett första förslag från Fosgerau & Buus Kristensen (2005), eller tidigare

genomförda CBAer för gränsöverskridande infrastrukturprojekt.

Nyckelord:

CBA, Godstransporter, Utvärdering, Nyttor.

ISSN: Språk: Antal sidor:

0347-6030 Engelska 35

VTI rapport 798 Foto: Hejdlösa Bilder

Preface

The use of Cost Benefit Analysis (CBA) as an appraisal method for Swedish

infrastructure investments and measures is mandatory in national transport planning,

and the Swedish Transport Administration is responsible for the development of CBA

guidelines. This project is a first step to address the question on how to handle cross-

border transports and the allocation of user benefits related to these transports in the

CBA context. Whether a second step will be realized will be decided by the Transport

Administration based on the conclusions of this report. The project is financed by the

Swedish Transport Administration.

The project has been carried out by Anna Mellin, Åsa Wikberg and Inge Vierth at VTI

May–September 2013.

Stockholm, 21 October 2013

Anna Mellin

Project Manager

VTI rapport 798

Kvalitetsgranskning

Granskningsseminarium genomfört 25 september 2013 där Henrik Swahn var lektör.

Anna Mellin har genomfört justeringar av slutligt rapportmanus 21 oktober 2013.

Projektledarens närmaste chef Anders Ljungberg har därefter granskat och godkänt

publikationen för publicering 21 oktober 2013.

Quality review

A review seminar was carried out on 25 September 2013, where Henrik Swahn

reviewed and commented on the report. Anna Mellin has made alterations to the final

manuscript of the report. The project manager’s research director Anders Ljungberg

examined and approved the report for publication on 21 October 2013.

VTI rapport 798

Table of content

Summary ............................................................................................................ 5

Sammanfattning ................................................................................................. 7

1 Introduction .............................................................................................. 9

1.1 Background .............................................................................................. 9

1.2 Purpose of the study .............................................................................. 11

1.3 Method and limitations ........................................................................... 11

2 Literature study ...................................................................................... 13

2.1 National CBA guidelines ........................................................................ 14

2.2 CBA in the European Union ................................................................... 21

2.3 Summary ............................................................................................... 21

3 Case studies .......................................................................................... 23

3.1 Fehmarn Belt (Germany/Denmark) ........................................................ 23

3.2 The Brenner Base Tunnel (Austria and Italy) ......................................... 25

3.3 Helsingborg – Helsingør (Sweden/Denmark) ......................................... 26

3.4 Summary of case studies ....................................................................... 27

4 Discussion and conclusions ................................................................... 29

References ....................................................................................................... 31

VTI rapport 798

VTI rapport 798 5

Allocation of user benefits for international freight transports – in cost-benefit

analysis

by Anna Mellin, Åsa Wikberg and Inge Vierth

VTI (Swedish National Road and Transport Research Institute)

SE-581 95 Linköping, Sweden

Summary

The aim of this project is to analyse when, if and how a transport cost reduction,

following an infrastructure investment affecting international freight transports, should

be allocated between countries in a cost-benefit analysis (CBA).

In order to analyse this question, the project has been split into two stages. This first

stage aims at presenting a more general picture of how the user benefits could be

allocated according to the scientific literature, how recommendations on this issue are

designed in other countries, and whether this issue is treated in transnational

infrastructure projects. The first stage also addresses issues concerning the geographical

scope of CBAs, the external effects included in the analysis, and the components that

form the time-related user benefits. This study is divided into three steps. First, we

present a survey of the scientific literature, where research in the area is presented at a

general level. Second, we present a review of national CBA guidelines. Finally, we

present some case studies of transnational infrastructure projects. The study is limited to

freight transports.

The conclusions from this report will form the basis for a decision of whether to

proceed with an extended analysis, which, if realized, will be the second stage of the

project. The second stage would aim at giving recommendations on how the allocation

issue could be addressed in the Swedish CBA guidelines. The second stage would also

contain a more thorough description of the methods presented in stage one.

The allocation of user benefits for freight transports is rather complex, since cost

savings do not only affect the operator of the vehicle or vessel, but also the cargo sender

and/or receiver. Hence, the nationalities of the sender and receiver are more relevant

than that of the vehicle owner. The division of the cost reduction between the sender

and receiver is also important. The allocation of user benefits for cross-border freight

transport cost due to infrastructure investment has not been frequently addressed in the

scientific literature. The available scientific literature however indicates that the

allocation of user benefits can have substantial effects on the profitability of

infrastructure measures.

The review of national CBA guidelines shows that recommendations or discussions on

the allocation of user benefits outside national boundaries are very rare.

Recommendations on this specific issue are given only in Finland and Sweden, although

the topic is discussed to some extent in a few more countries. In Germany, the issue is

acknowledged, but handled somewhat differently than in Sweden and Finland. The EU

has CBA guidelines advocating a broader perspective than the national level, but no

recommendations on the allocation of user benefits for international freight are given.

The final step in the study was to look at a few case studies of transnational

infrastructure investments, and the CBAs preceding these investments. A first

conclusion is that such CBAs are not easily available. In our review we found one case

6 VTI rapport 798

study, the Fehmarn Belt fixed link, where an allocation of the benefits from time

savings and vehicle operating costs includes both countries involved in the investment

and some of the surrounding countries. The allocation of user benefits in this CBA

follows a simplified version of the method discussed in the scientific literature.

The conclusion from our study is that to our knowledge no other country has a well-

founded allocation method that could be implemented in Sweden. Nor does the

literature offer any strong recommendations or straightforward theoretical methods,

with the exception of a first suggestion by Fosgerau and Buus Kristensen (2005).

VTI rapport 798 7

Fördelning av nyttor för internationella godstransporter i kostnadsnyttoanalyser

av Anna Mellin, Åsa Wikberg och Inge Vierth

VTI

581 95 Linköping

Sammanfattning

Syftet med detta projekt är att analysera när, om och hur transportkostnadsminskningar,

som följer av en infrastrukturåtgärd som påverkar internationella godstransporter, kan

fördelas mellan olika länder i en kostnadsnyttoanalys (CBA).

För att besvara frågan har projektet delats upp i två delar, varav denna rapport utgör den

första delen och syftar till att ge en övergripande bild av hur en fördelning kan ske enligt

den vetenskapliga litteraturen, hur eventuella rekommendationer ser ut i andra länder,

samt om frågan har behandlats i gränsöverskridande infrastrukturprojekt. I den första

delen behandlas också frågor kring den geografiska avgränsningen för CBA, vilka

externa effekter som ska inkluderas i analysen, samt vilket komponenter som ingår i de

tidsrelaterade nyttorna. Studien är uppdelad i tre steg. Först genomförs en studie av

vetenskaplig litteratur, där forskning kring ämnet presenteras på ett övergripande plan,

sedan följer av en översyn av nationella CBA- riktlinjer för olika länder och slutligen

presenteras några fallstudier av gränsöverskridande infrastrukturprojekt. Den här

studien är begränsad till godstransporter. Slutsatserna från den här rapporten ska sedan

ligga till grund för ett beslut om en fördjupande studie, d.v.s. del två. Del två syftar till

att mer specifikt ta fram ett förslag på en metod för hur allokeringsfrågan skulle kunna

behandlas i de svenska riktlinjerna. I del två ges också en fördjupning av de metoder

som presenterats mer generellt i denna första del.

Fördelningen av transportkostnadsminskningar för gränsöverskridande godstransporter

är komplex, eftersom kostnadsbesparingar inte bara påverkar fordonsägaren eller

fartyget, utan även avsändaren och mottagaren. Därför är avsändarens och mottagarens

nationalitet, samt hur kostnadsminskningarna fördelas dem emellan, mer relevanta

faktorer än fordonsägarens nationalitet. Fördelningen av transportkostnadsminskningar

för gränsöverskridande godstransporter till följd av infrastrukturåtgärder är inte särskilt

utforskat i den vetenskapliga litteraturen. I den knappa forskning som hittats indikeras

att fördelningen av transportkostnadsminskningar kan ha betydande effekter på

lönsamheten för infrastrukturåtgärder.

Översynen av de nationella riktlinjerna för CBA visar att det sällan finns rekommenda-

tioner eller diskussioner kring fördelningen av kostnadsminskningar inom och utanför

landets gränser. Det är bara Finland och Sverige som har rekommendationer kring

allokering, samt att det i några fler länder förs en diskussion kring ämnet. I Tyskland

behandlas också frågan, men med ett annat tillvägagångssätt än i Sverige och Finland.

På EU-nivå finns riktlinjer kring CBA som förordar ett större perspektiv än det

nationella, men det ges inga specifika rekommendationer om hur nyttor kan fördelas

mellan flera länder.

I studiens sista steg har tre fallstudier av transnationella infrastrukturinvesteringar och

deras CBA:er studerats. En första slutsats är att dessa analyser är svårtillgängliga. I vår

granskning fann vi enbart en studie, som rör Fehmarn Belt-förbindelsen, där en

8 VTI rapport 798

fördelning av nyttorna mellan länder har genomförts. Nyttofördelningen i denna CBA är

en förenkling av den metod som diskuteras i den vetenskapliga litteraturen.

Slutsatsen från vår studie är att det inte finns något annat land som har en välunder-

byggd fördelningsmetod som skulle kunna implementeras i Sverige. Inte heller finns

någon stark rekommendation eller teoretiska metoder att hämta från litteraturen, med

undantag för ett första förslag från Fosgerau & Buus Kristensen (2005).

VTI rapport 798 9

1 Introduction

1.1 Background

Cross-border freight transports are essential for international trade. In Sweden, the

export and import flows almost equal the size of the GDP (SCB, 2013), and the EU is

the largest trader in the world, accounting for 20 % of the global exports and imports

(European Union, 2013). The EU is further the most important trade partner for

Sweden. In other words, foreign trade is important for the Swedish economy, and

efficient international freight transports are an important factor in achieving

competitiveness in the foreign trade market (Kommerskollegium, 2012; Nowak, 2005).

In the early 1990s, the EU started its work to create a single internal free market without

barriers for people, goods, services and money, with the aim to increase the prosperity

and economic growth within the region.

This led to a discussion on how to handle pricing in a free transport market. As for the

road sector where two principles where set against each other: the territorial principle,

implying that taxation should be based on the geographical area that the haulier

operated in, and the national principle, according to which taxation should be based on

the country of register of the vehicle. The aim was to enable hauliers levied with (high)

national taxes to be able to compete with hauliers from countries with already

implemented territorial taxes/charges (and low national taxes). This resulted in the

Eurovignette Directive 1999/62/EC, which regulates how user charges can be levied for

heavy good vehicles, since an introduction of user charges on transport, in this case for

road, can lead to increased trade barriers for carriers within the region (European

Parliament, 1999; Lindberg, 2013).

The present study focuses on international freight transports and how they are treated in

socio-economic analysis. To achieve efficient transport networks for cross-border

transport, technological development and infrastructure investments are needed. Cost-

benefit analysis (CBA) is an evaluation method used to facilitate efficient allocation of

scarce resources. By weighing the costs and benefits of a planned infrastructure project,

CBA provides important information for decision makers. In the case of infrastructure

investments, partial CBA is the most common method used. This approach is limited to

the direct effects of the investment, and not secondary effects such as network effects

and dynamic feedback in the economy as a whole. For infrastructure projects within the

EU, Schade et al. (2013) provide a discussion on the traditional partial CBA, which

does not incorporate European added value such as regional accessibility, border-

crossing sections and removal of bottlenecks in corridors. The allocation of user

benefits from international freight transports should be seen in this context, and as a

methodological issue in the CBA practice.

In Sweden, CBA guidelines for the transport sector are decided by a working group

called ASEK, which consists of representatives from all transport modes, from both

academia and the national transport-related agencies. The aim of the group is to assure

that the same set of principles and values are used in socio-economic analyses

throughout the Swedish transport sector.

10 VTI rapport 798

For domestic freight transports1, where senders and receivers are located in Sweden, the

firms’ time and cost savings as well as the external effects caused by the whole

transport are included in the CBA for infrastructure measures.2 However, it is less

obvious how a CBA should handle the user benefits for border-crossing freight

transports. The Swedish CBA guidelines published in 2002 do not specify how to

allocate the user benefits between countries. In a 2008 guideline update3, this changed

after a reoccurring discussion on how to allocate the user benefits of improved port-

related infrastructure, e.g. fairways.4 The discussion resulted in a new recommendation

for projects that affects cross-border transports to a large extent (with an origin or

destination in Sweden), and where significant user benefits are expected. This

recommendation suggests that in such cases, 50% of the user benefits should be

allocated to Sweden and the other half to other countries affected by the investment.

The main reasoning behind this is that investments may lead to more efficient

international transports also outside the Swedish territory and consequently reduce

transport costs for non-Swedish actors. The current guidelines maintain this

recommendation5 (Trafikverket, 2012a).

However, the theoretical basis for the specific recommendation in the Swedish CBA

guidelines – that half of the user benefits from an investment affecting international

transports should be accounted for in the Swedish CBA – has not been clearly

identified. It should be noted that allocating benefits among several countries strongly

affects the relation between costs and benefits. All things equal, an allocation of user

benefits to several countries, rather than just one, increases the costs relative to the

benefits (given that one single country is financing the investment), which lowers the

profitability of the investment. ASEK provides recommendations on a number of

parameters connected to traffic and infrastructure but does not address the geographical

scope of the costs and benefits, apart from user benefits for cross-border transports. For

example, when it comes to air pollution and CO2 emissions, the recommendation is to

apply a strictly national basis for the analysis (Trafikverket, 2012a).

The Swedish CBA guidelines are open for alternative approaches if motivated. Recent

examples of alternative procedures include the CBA of an expansion of the fairway in

the port of Hargshamn, planned by the Swedish Maritime Administration. The port of

Hargshamn mainly handles import and export, and in this case all user benefits are

allocated to Sweden instead of only half, as is recommended in the CBA guidelines.

The motivation behind this is that the market prices of the goods handled in the port are

strongly dependent on world market prices, and therefore an improvement in this

Swedish port will not affect the prices of the goods to the final consumer. However, an

improvement may lower the producers’ costs by facilitating economies of scale and

1 This study focuses on freight transports. The issue is also relevant for passenger transport, but for

freight the international and transit aspect is larger and more complex.

2 For sea transports (to/from Gotland), only the transport on Swedish territory (12 distance minutes from

the coast) is taken into account.

3 ASEK 4 guidelines (SIKA, 2008)

4 (Eriksson, 2013).

5 The recommendation states that it is the consumer surplus that should be allocated, however it should be

both consumer and producer surplus (to include freight), that should follow the allocation principle

(Bångman, 2013).

VTI rapport 798 11

hence reducing transport costs. This generates a producer surplus that is accounted for

in the analysis. On the import side, the price of the goods is also set on the world market

and is not affected by the fact that larger ships can call the port of Hargshamn. Swahn

argues that whether the transport is contracted by the foreign producer or the Swedish

importer, the larger ships’ lower cost per tonne of transported goods generates a

decrease in the total cost of the product in the long run, which generates a producer

surplus in Sweden (the importer) (Swahn, 2013).

The inclusion of user benefits outside Sweden in the Swedish CBA guidelines

originates from the Swedish Maritime Administration.6 However, the allocation of the

benefits can also be relevant for land-based transport modes. VTI (Vierth & Karlsson,

2012) estimates that an investment in the main rail line between central Sweden and the

Øresund Bridge, so that this rail line could carry 750 m long trains instead of the current

limit of 630 m, would be repaid after only 1-5 years. The motivation for this relatively

short period is that the Danish and German infrastructure is already prepared for 750 m

trains, and the removal of the Swedish “bottleneck” is calculated to generate cost

savings for all transports along the entire route with Swedish senders and/or receivers.

The payoff time would be much longer if not all border-crossing transports were

included.

It is finally worth noting that in practice, the traffic flows are (in the Swedish case) not

separated in the CBA. Rather, the measured flows are calculated on roads, tracks and in

ports, without distinguishing between nationality neither for passenger nor freight.

1.2 Purpose of the study

The aim of this report is to analyse the allocation of user benefits of transport

infrastructure measures that affect international freight transports to, from and through

Sweden. The main question addressed is when, if and how a transport cost reduction for

international freight transports following an infrastructure measure should be allocated

between countries, in the context of a CBA.

Relating to national CBA guidelines, we will also study how a few selected countries

handle the following issues related to the main question.

Which is the geographical scope of the CBA?

Which externalities (i.e. safety, and different health and environmentally related

impacts) are taken into account in the CBA, and what is the geographical scope

of these?

Which components are included when analysing the value of time for freight

transports, and cost reductions for both cargo and vehicles?

Focus is placed on how a CBA should treat the user benefits for cross-border freight

transports following a national or cross-border infrastructure investment or measure.

1.3 Method and limitations

The project is conducted in two stages, where this first stage focuses on what relevant

knowledge can be extracted from the scientific literature, from general CBA practice in

other countries and from experiences gained in transnational infrastructure projects. The

aim is to give a general description of the field, and not to present an in-depth analysis

6 Bångman, 2013.

12 VTI rapport 798

of methodological details. A more thorough methodological discussion will instead

follow in stage two, if realised.

The paper consists of three parts. The first part is a literature survey exploring whether

and how the topic of interest is treated in the scientific literature. The main tool used to

search the literature is Summon (Serial Solution7), which covers more than 18 million

papers in full text and approximately 22 million bibliographic posts from Web of

Science, VTI’s national library, ERIC, RePEc IDEAS och SwePub. The keywords used

in the literature search were:

Allocation

Benefit cost analysis (BCA)

Cost benefit analysis (CBA)

Cost savings

Distribution

Freight

Guidelines

Time savings

Transport

User benefits

In the second part, we study whether the allocation of user benefits is addressed in

national CBA guidelines for transport. In addition to collecting guidelines from the

relevant countries, we contacted some national transport agencies and ministries. An

online literature search via Google covered the so-called grey literature (e.g. working

papers and reports). The literature survey and CBA review were complemented with

contacts with researchers and practitioners in Sweden and other relevant countries. The

third part of the paper includes an account of a few case studies of transnational

infrastructure projects, where a CBA was carried out as part of the planning process.

Admittedly, the scope of the latter two parts was limited by the authors’ language skills.

This paper will serve as a background for a potential second stage, which if

implemented will aim at developing the Swedish approach concerning the allocation of

user benefits. This will include a discussion on the relevance and application of the

existing recommendations, and the possibility to improve the present CBA guidelines.

The aim should be to use recommendations in the Swedish CBA based on scientific

outcomes.

7 http://vti.summon.serialssolutions.com/

VTI rapport 798 13

2 Literature study

Cost-benefit analysis, or CBA, is an evaluation method based on welfare economics,

used to weigh the benefits against the costs of a planned project, e.g. a planned

infrastructure investment. The basic principle is that a project is worthwhile from a

societal point of view if its benefits are greater than its costs, and not worthwhile if the

costs instead exceed the benefits (Brent, 2009). The method was introduced in Sweden

in the 1960s, and has been applied mainly within the Swedish transport sector

(Trafikverket, 2012f).

There is a massive literature on the application of CBA within different sectors. Today,

many countries have guidelines for CBA within the public sector, and many also have

specific guidelines for CBA within the transport sector. Within the EU, a CBA must be

completed prior to infrastructure investments co-financed by the EU (European

Commission, 2008).

An issue that has rarely been explored in the scientific literature is the particular

situation when an infrastructure investment concerns more than one country, as for

example when building a bridge connecting two countries. In a co-financed cross-border

investment, the CBA naturally has to consider the effects for the citizens in at least the

two directly involved countries. For passenger transport, it is rather straightforward to

separate the effects, at least in theory, since passengers can be categorized by

nationality, and externalities are relatively easily tied to specific places. The user

benefits can be divided accordingly. For freight, however, the distribution of user

benefits is more complex. The issue is that the user benefit does not only affect the

operator of the vehicle or vessel, but also, or even mainly, the cargo owner (seller) and

the receiver (buyer) (Fosgerau and Buus Kristensen, 2005).

In the transport decision for freight, there are also several other actors involved, such as

suppliers, carriers and receivers. These can be divided into several sub-groups, e.g. the

supplier (producer) may not be the actor selling the product to the final customer, and

normally a third party acts as the carrier, which may not own the vehicle used for the

actual transport. There are in other words many actors involved in the logistics from

producer to end consumer. In the context of a CBA, the main issue is what shares of the

transport cost reductions accrue to the sellers and buyers respectively, and where the

actors are located (Fosgerau and Buus Kristensen, 2005). Hence, the country of origin

of the vehicle or vessel is not very important for the outcome of the CBA.

The literature survey shows that this is a rather unexplored area for freight transports.

To our knowledge, only one paper, by Fosgerau and Buus Kristensen (2005), addresses

the allocation of user benefits. They study the allocation of user benefits from freight

transport cost reductions, with a case study of a cross-border investment, i.e. the

Fehmarn Belt fixed link (see also Section 4.1). The analysis focuses on two countries,

Denmark and Germany, although other countries are added in the allocation analysis as

well. Fosgerau and Buus Kristensen (2005) base their theoretical analysis on a model

developed by Jara-Diaz (1986) and Transport and the Economy (1999) to assess the

allocation between seller and buyer of goods, depending on if a country has an excess

supply of or demand for different goods. The model needs input on the demand and

supply elasticities (i.e. import and export elasticities) in the relevant countries or regions

assessed. The results show that a country with a less elastic import demand or export

supply than the rest of the world (or other countries in the analysis) receives a greater

share of the user benefit. The allocation also depends on the countries’ total share of the

supply of and demand for a good. The example shows that if the share of the demand is

14 VTI rapport 798

low or the share of the total supply is high in one country, this country receives the

greater user benefit. This means that if there is trade between a small peripheral region,

such as the Scandinavian countries, and a larger region more centrally located, such as

Germany, the proposed model stipulates that the small peripheral region would most

likely be allocated the most user benefits (Fosgerau and Buus Kristensen, 2005).8

Fosgerau and Buus Kristensen’s (2005) analysis indicates the feasibility of allocating

the user benefits in a cross-border CBA, and that the choice of allocation principle can

have a significant impact in distributing these benefits, especially for infrastructure

measures or investments with a significant impact on freight transports.

2.1 National CBA guidelines

This section presents an overview of national CBA guidelines. The countries have been

selected based on the relevance for Sweden and the availability of guidelines in

languages mastered by the authors or by contacts in their network.

2.1.1 Austria

In Austria, the lack of general guidelines in infrastructure investments has been

acknowledged, and recently, a set of standardized procedures and appraisal methods

were compiled. These guidelines consider economic, environmental and social

consequences of infrastructure investments (Bmvit, 2013).

The guidelines recommend an extended CBA approach meaning that the CBA is

embedded in an impact analysis. It is stressed that the extended CBA can support but

not replace a decision. The regional dimension can be municipal, national or European.

The guidelines do not specify time and cost savings in detail (Fritz et al., 2012). The

monetary valuation of the external effects is based on the handbook produced within the

IMPACT project (CE Delft, 2008). However, the guidelines do not specify which

external effects have to be included in the CBA.

The guidelines differentiate between planning region, for which infrastructure measures

are planned, and study region, which comprises the area influenced by the traffic in the

planning region. There is no specific rule on how to allocate the user benefits between

the countries.

The assessment approach is explained for the Baltic-Adriatic axis. The Baltic-Adriatic

Corridor is among the most important cross-Alpine lines in Europe by railway (BATCo,

2013). In this case, the whole of Austria is seen as the planning region, while the

NUTS2 regions9 in the countries along the corridor constitute the study region. It is

mentioned in the guidelines that the traffic and socio economic impacts outside Austria,

and the European dimension needs to be taken into account. The impacts addressed are

the modal shift from road to rail due to the improved service level and economic

impacts like increased demand during the operation phase (improved access, lower

transport costs) (Fritz et al., 2012).

8 An additional complication for practical use is the presence of the factor of the cost of public funds (e.g.

in Sweden); see more in Fosgerau and Buus Kristensen (2005).

9 NUTS (Nomenclature of Territorial Units for Statistics), by regional level (NUTS)

VTI rapport 798 15

2.1.2 Denmark

The Danish ministry of transport (Transportministeriet) has a set of CBA guidelines

adapted to the transport sector. Cross-boundary effects are mentioned in the guidelines,

for example in reference to international freight corridors. Yet, as of today, a valuation

of these effects is not a part of the standard procedure for CBA, since the national

territory sets the geographical limitation of the CBA. However, it should be mentioned

that cross-boundary effects were part of the CBA preceding the decision to build the

Fehmarn Belt connection (Trafikministeriet, 2003).

A paper by Danish authors Fosgerau and Jensen (2003) discusses the allocation of user

benefits to other nations, and concludes that the allocation of user benefits for freight

transport is not obvious. This is because the nationality of vehicle or vessel is not of

main relevance since cost reductions are rather divided between senders and receivers

(see further in the literature review). They conclude that for simplicity in cross-national

CBA, the user benefits could be split equally between the senders and receivers, i.e.

split equally between the countries.

The external effects considered are air pollution (NOx, HC, SO2, CO and particles),

global warming (CO2), health effects, noise and barrier effects. These externalities are

quantified using four categories: effects from increased (new) traffic, effects from

changed route, effects from passenger transfer through modal change, and effects of

goods transfer through modal change (Trafikministeriet, 2003).

The time-related effects are measured via travel time and costs related to operating a

vehicle. Travel time savings are measured through changes in travel time and are valued

through willingness to pay studies referred to in HEATCO (2006). Changes in costs

related to operating a vehicle are valued using the market price for relevant components,

such as fuel, wear and tear and capital costs (Trafikministeriet, 2003).10

2.1.3 Finland

Finland has both general guidelines for transport-related assessments and mode-specific

guidelines. All of these are available, in Finnish, at the website of the Finnish Transport

Agency (Liikennevirasto, 2013). The general guidelines state that only effects for

Finnish citizens and companies should be included in the CBA. Since this

recommendation is not always feasible in practice, there are specific guidelines for the

different transport modes. For road transports, international and national traffic are

treated equally, i.e. time savings for Finnish and foreign goods vehicles are fully

included in the CBA, but only Finnish unit values are applied. The same argument is

applied for rail and maritime transports. Transit transports are however treated

differently, since there is a notion that the user benefits in this sector also accrue to other

countries than Finland. In the following effects are included in the CBA:

1) Change in producer's surplus of domestic transport service providers (e.g. harbours).

2) Net effect on government's revenue from railway and fairway charges.

3) Effects on railway and fairway maintenance costs.

10 Recommended unit values for the above mentioned effects are provided in cooperation with the Danish

Technical Universities (DTU) and can be found at the DTU website (DTU, 2013).

16 VTI rapport 798

4) The global and local emission costs. CO2 emissions are calculated from total route

kilometres, which means that also emissions outside Finland are included. For other

emissions, only emissions inside Finnish borders are included.

5) The effects on accident costs.

The guidelines for allocation of user benefits came from the former Finnish Maritime

Administration. The interpretation of the guidelines was provided by Anton Goebel at

the Finnish Transport Agency (Goebel, 2013).

The following externalities are addressed, and should be quantified and valued:

accidents, air pollution (CO, HC, NOx, PM2.5 and SO2), greenhouse gas emissions (CO2,

CH4, N2O) and noise. Only air pollution within the national borders is covered.

However, for greenhouse gases the geographical scope can be wider if it is has been

proven that the planned investment affects emissions outside Finland. For freight user

benefits, it is stated that it is not feasible to distinguish between producer (e.g. a ship

owner) and consumer (e.g. a forest industry) surplus. Vehicle costs and the value of

time are discussed, yet there are no specific instructions for freight transports

(Liikennevirasto, 201311).

2.1.4 France

France has guidelines for transport-related CBAs from 2001. They are called “Rapport

Boiteux” and were written in French by the former institution for economic planning

(Commissariat General du Plan, 2001). An updated version of the guidelines is

underway and should be presented by the end of 2013 (Treich, 2013). The update

however, do not address the allocation of user benefits (Meunier, 2013)

The current guidelines do not address allocation of user benefits of international freight

transports, and the geographical limitation of the CBA is the national territory. When it

comes to time savings, these are divided between carriers and shippers. For carriers, the

time savings include values for goods, fuel and maintenance costs. For shippers, the

time is valued per hour and consignment. The externalities considered are accidents,

airborne pollutions (i.e. PM, VOC, NOx and SO2), greenhouse gases and noise

(Commissariat General du Plan, 2001).12

2.1.5 Germany

The German CBA guidelines for the national road, rail and inland waterway network

(Bundesverkehrswegeplan, BPWP) are provided by the Ministry of Transport, Building,

and Planning (Bundesministerium für Verkehr, Bau- und Wohnungswesen, 2005).

Improvements of the conditions for border-crossing transports that can enhance the

international integration aspect are mentioned. In BVWP 1992 and BVWP 2003, a

mark-up of up to 10% of the time and cost savings is allowed to be applied for

infrastructure measures which are considered important for international transports.

Recently a new approach has been developed that takes into account the benefits

independently of in which country they occur. It is assumed that cross-border

infrastructure projects in Germany lead to integration and employment effects. The new

method has already been applied in the planning of rail projects, e.g. the hinterland

11 Johanna Jussila-Hammes, VTI, helped us with the translation from Finnish. 12 Claire Papaix, IFSTTAR, helped us with the translation from French.

VTI rapport 798 17

connection of the fixed link over the Fehmarn Belt (BVU & Intraplan, 2010). The new

method will be documented in the 2015 BVWP guidelines, scheduled to be published in

early 2014 (draft) and 2015 (final version) (Monse, 2013).

The CBA guidelines address the following external effects: safety, air pollution (CH,

NOx, SO2 and PM), climate gases (CO2), noise and intrusion in the landscape. The

estimations of time and cost savings for freight transports, only include savings related

to the vehicles and staff and savings related to the cargo transported are not taken into

account.

2.1.6 Ireland

The Irish Department of Transport has compiled CBA guidelines for investments in the

transport sector (Department of Transport, 2009). The guidelines also incorporate

recommendations for a complementary multi-criteria analysis (MCA).

The guidelines do mention the importance of having a transport system that is integrated

with those of other countries, and cross-border infrastructure improvements are

acknowledged to generate user benefits. However, the guidelines do not further

elaborate on the issue of user benefit allocation between countries, nor are any

geographical limits explicitly stated for the appraisal. Dempsey (2013) confirms that

such aspects are currently not considered. Hence, the guidelines do not provide any

recommendation on how to allocate the costs and benefits of international freight

transports.

Benefits for transport users and operators are addressed, including travel time savings.

Time-related benefits are only mentioned in relation to passenger transports. User

benefits in the freight sector focus on vehicle operating costs. These are divided into

fuel costs and non-fuel costs, including for example maintenance and depreciation of

the vehicle (Department of Transport, 2009).

The term externality is not used explicitly in the guidelines. However, they do

recommend that effects on safety and environment, including noise and airborne

emissions, should be monetized. For other environmental impacts, such as effects on

landscape, cultural heritage and biodiversity, it is recommended to quantify the area

directly impacted (Department of Transport, 2009).

2.1.7 The Netherlands

The Netherlands has national guidelines available at CPB (Centraal Planbureau, or the

Netherlands Bureau for Economic Policy Analysis), which is an independent research

institute under the Ministry of Economic Affairs. The guidelines are a result of a major

research programme, OEI – research programme on the effects of infrastructure, carried

out jointly by several Dutch economic research institutes (CPB, 2013).

The general recommendation is to limit the CBA to the Dutch territory and only include

costs and benefits within the Netherlands. The document includes a discussion on

allocation of user benefits related to international transports. In general, the guidelines

states that the funding for infrastructure measures is from Dutch taxpayers, and

therefore the most relevant are the user benefits to firms and households within the

national borders (i.e. the Dutch taxpayers). There is also a discussion on the indirect

effects, such as the difficulties in estimating how an infrastructure measure affects the

Dutch ability to compete in relation to actors abroad. An allocation could be made, e.g.

18 VTI rapport 798

by looking at the domestic flows and the domestic parts of international transports in the

transport model. In practice, however, the time benefits for both national and

international flows from improvements in The Netherlands will be fully included in the

CBA (de Jong, 2013; CPB and NEI, 2000).

The guidelines recommend including monetizing of externalities, such as air pollution,

CO2 and accidents, but also effects that are more difficult to monetize, such as intrusion

in the landscape. The main report does not recommend any explicit values (CPB and

NEI, 2000), but officially recommended time values are found in the Annexes and on

the website of Rijkswaterstaat, which is part of the Ministry of Infrastructure and the

Environment. New guidelines on the time value and reliability for both passenger and

freight transports are available from 2013 (KiM, 2013).

2.1.8 Norway

In Norway it is the Ministry of Finance that sets guidelines for socio-economic analysis.

Although transport measures are a frequent reference, the guidelines apply to all public

measures and are not specific for the transport sector. In the Norwegian CBA

guidelines, there is no recommendation on how to allocate the cost reductions in

international freight transport. There is, however, a discussion on the distribution of user

benefits, but it focuses mainly on individual households and refers to the guidelines

recommended at the EU level in HEATCO (2006), in the UK and in Sweden

(Norwegian Ministry of Finance, 2012). There are also more specific guidelines for the

transport sector presented by the Norwegian Road Administration (Statens vegvesen,

2006). However, their handbook does not address the issue of cross-border transports.

Nor does it set specific geographic limits, although it does recommend that the

geographic scope be limited in a way that suits the project at hand.

The Norwegian handbook recommends both methods and values for time savings and

externalities. The value of time for freight transports includes wages, administrative

costs and capital costs. Recommendations are only given for heavy trucks, above 3.5

tonnes. Inconvenience in ferry connection, e.g. waiting time, is also included.

Externalities that are valued are accidents, noise, air pollution (NOx, NO2, PM10) and

greenhouse gases (i.e. in CO2 equivalents mainly consisting of CO2 and N2O). The last

two categories should be presented at a local, regional and global level (Statens

vegvesen, 2006).

2.1.9 Sweden

The national guidelines for transport-related CBAs and the allocation issue have already

been described in the background section of this report. This sub-section will focus on

the limitations and externalities and the value of time.

The general approach in CBAs of Swedish infrastructure investments, financed by

Sweden, is that the scope of the costs and benefits should be limited to the Swedish

territory. For the external costs, it is therefore recommended to include local and

regional emissions (i.e. NOx, SO2, PM2.5 and VOC) as well as global emissions (i.e.

CO2) that are emitted in the Swedish territory. These effects should also be valued

according to the CBA guidelines. It is further discussed that the guideline concerning

the scope of global emissions could be adjusted if the transport sector is included in an

international regulation implementing responsibility for emissions outside Swedish

territory. Since today the responsibility of Sweden is limited to the national territory

VTI rapport 798 19

(Trafikverket, 2012a; 2012b). There are also recommended values for safety and noise

(Trafikverket, 2012c; 2012d).

To value time and quality for freight transports, two values are recommended in the

Swedish guidelines. First, the value of time (VOT) is commodity specific and based on

the value of the products transported. The same is true for the value of reliability (VOR)

for rail and road, which is assumed to be two times the VOT. Second, the transport costs

are vehicle specific and based on wages, capital costs and other administrative costs,

such as insurance (Trafikverket, 2012e).

2.1.10 United Kingdom

UK guidelines for socio-economic analysis are found in the Transport Appraisal and

The Treasure Green Book by the Department for Transport (2011), as well as in other

documents with specific guidelines in the so-called WebTAGs (Department of

Transport, 2013).

The boundary of the CBA is the national borders, although the guidelines do mention

the effects on non-UK residents and firms. It is concluded that as the costs and benefits

for non-UK actors are insignificant for most infrastructure measures, it is not reasonable

to spend resources attempting to identify and quantify them. In some cases, when an

infrastructure measure is expected to have a significant impact on non-UK residents and

firms, these costs and benefits should be included in the so-called Supporting Analyses.

However, this document is still under development (Department of Transport, 2013).

The externalities accidents (safety), local air pollution, noise and greenhouse gases are

addressed and monetized. Impacts on landscape, townscape, biodiversity and water

environment are excluded so far, since these effects are not yet given a monetary value.

These impacts, as well as other non-monetized effects, should be addressed and

assessed in the so-called Appraisal Summary Table, and there is specific guidance for

this (Department of Transport, 2012). Value of time is given in the guidelines, but there

are only recommendations for passenger transports (Department of Transport, 2012).

2.1.11 Australia

Australia has general CBA guidelines for investments in the public sector in a handbook

published by the Department of Finance and Administration. The handbook does not

address the issue of how to allocate the costs and user benefits of international freight

transport (Commonwealth of Australia, 2006).

There are also specific CBA guidelines for the transport sector. In these guidelines, the

issue of international transports is not discussed, and it appears that the geographical

scope of the CBA is the national borders. Interstate investments are discussed, but there

is no mentioning of allocation of user benefits (Australian Transport Council, 2006).

The guidelines state that if valuations of environmental externalities are not available, a

qualitative assessment should be done. The guidelines provide monetary values for the

following externalities: air pollution (i.e. CO, NOx, PM10 and THC13), GHG emissions

(CO2, CH2 and N2O), noise, water run-off from roads, nature and landscape, and urban

separation. Also safety is included. Value of time only seems to be addressed for

passenger traffic, and freight user benefits are captured via reduced vehicle operating

13 Total hydrocarbons

20 VTI rapport 798

costs, including fuel, tyres, maintenance and depreciation (Australian Transport

Council, 2006).

Updated guidelines are under development (GHD, 2012).

2.1.12 Canada

Canadian national guidelines for socio-economic analysis are referred to as benefit-cost

analysis (BCA). CBA guidelines for the transport sector are provided by Transport

Canada, an organization under the Minister of Transport with responsibilities for

transportation policies and programmes (Transport Canada, 2013a).

The Canadian guidelines include user benefits for non-Canadian residents. The

motivation behind this is primarily reciprocity, i.e. that Canadian residents benefit from

other countries’ investments as well. They further argue that there is usually insufficient

data to separate the user benefits from national and international actors (Transport

Canada, 2013b).

Benefits covered by the guidelines are safety, transportation efficiency, productivity

gains, and environmental and transitional effects. The external effects covered are safety

and different environmental effects, such as noise, pollution (to ground, air and water),

degradation of habitats and natural environments, loss of amenities, and disposal of

contaminated soil. However, many of the environmental effects are difficult to measure

and not mandatory to include, and it is stated that these effects should be quantified to

the extent practicable (p. 50, Transport Canada, 2013b).

Time-related benefits for freight are related to vehicle operating costs, fuel costs, value

of transit time for cargo, and wages (Transport Canada, 2013b).

2.1.13 USA

As in Canada, CBAs are referred to as BCAs in the U.S. The federal guidelines are

provided by the U.S. Department of Transportation (2013), and there is a focus on the

user benefits for U.S. residents. With regard to allocation of user benefits, there are no

recommendations, neither between states nor between countries (U.S. Department of

Transportation, 2013). However, the issue is discussed in a document of frequently

asked questions. The question concerns ports and the benefits diverted from foreign

ports to the national economy due to a national investment. The response to this

question is that cost savings or increases in productivity associated with the port activity

created should be included in the national calculation (U.S. Department of

Transportation, 2012).

Distributional effects are to be handled via an identification of winners and losers. For

economic incidence, the final recipients of income are individuals and households;

hence costs and benefits should be identified based on how these groups are affected.

There is however a complexity when considering these aspects in practice (Whitehouse,

2013).

The U.S. guidelines state that there is a need for more research before recommending

complete values of time in freight (U.S. Department of Transportation, 2013). For

externalities, there are recommendations for safety (i.e. fatalities, injuries and property

damage) and environmental impact (i.e. CO2, VOC, NOx, SOx and PM) (U.S.

Department of Transportation, 2013).

VTI rapport 798 21

2.2 CBA in the European Union

The aim of an integrated European transport system has resulted in several trans-

European infrastructure projects. The EU programme TEN-T aims at harmonizing

national infrastructure toward a common European standard, in order to facilitate the

circulation of goods and people within the union. The projects within TEN-T are often

large scale and demand a meticulous appraisal prior to the investment decision. A

standardized transport system requires a standardized evaluation methodology, which

has prompted the initiation of a number of EU projects, resulting in several

methodological handbooks. One of these projects is HEATCO (2006), which has led to

a set of standards aimed at establishing a harmonized European appraisal method.

Furthermore, EU has compiled a set of general CBA guidelines. CBA has been used in

the cohesion policy since the 1990s and has been a requirement since 2000. The

guidelines cover investments in a range of sectors, including transport investments.

Although they do not directly address transnational effects of investments, they do

mention the possibility of a transnational perspective on infrastructure investments. The

guidelines provide that even regional transport projects should be evaluated from a

larger perspective since regional projects can be important in an integrated network. It is

also mentioned that the perspective in a CBA could be local, regional, national, EU or

global (European Commission, 2008).

For the value of freight and passenger time savings, estimations from HEATCO and

IMPACT (CE Delft, 2008) are used. Environmental externalities are also analysed in

relation to time savings, since these depend on travel distance and exposure to polluting

emissions. When local values are not available, is it recommended to use prices from

the scientific literature (European Commission, 2008).

External costs considered are emissions, noise, accidents and congestion. User benefits

considered are changes in transport costs, such as fares, tariffs, tolls and vehicle costs,

vehicle operating costs, profits and losses of infrastructure managers and transport

service operators as well as variations in taxes and subsidies for the government and in

external costs. A distinction is made between the benefits for existing traffic (e.g. time

and cost reductions), the benefits for the traffic diverted from other modes (variation in

cost, times and externalities due to shifts in mode), and the benefits for the generated

traffic (social surplus variation) (European Commission, 2008).

2.3 Summary

The review of national CBA guidelines includes a total of 13 countries. All the studied

countries have specific guidelines for the transport sector, and some have both general

guidelines for public measures and specific guidelines for the transport sector.

Usually, national transport agencies or governmental departments are responsible for

the guidelines for the transport sector. The guidelines are generally developed by a

group of experts from e.g. research programmes or academia, and are usually published

in the respective countries’ official languages. The level of specification, i.e. on explicit

unit values to be used, varies between countries.

The issue of how user benefits from infrastructure investments could be treated in an

international context is only mentioned in the guidelines of the Netherlands, Germany,

Canada, Sweden and Finland. The guidelines from the EU are however clear on the fact

that a CBA must not be limited by national borders; rather, an infrastructure investment

22 VTI rapport 798

should be seen in a regional, international, and even global perspective. It is not further

specified how the international allocation of user benefits should be treated. The only

countries in our survey that give any specific recommendations for allocation of user

benefits outside their respective borders are Finland and Sweden. A common

denominator for Finland and Sweden is that the initiative for this recommendation came

from the maritime sector. In Germany there is also a recommendation for international

freight transports, but instead of allocating the user benefits it is recommended to mark

up the user benefits by up to 10 %. As for externalities, these are generally, in all

countries, limited to the national territory. However, for greenhouse gases the

recommendations differ. For example, in Finland, also emissions emitted outside the

country are included.

VTI rapport 798 23

3 Case studies

The literature review and the national guidelines only generated few indications on how

to handle the issue of allocation of user benefits for international freight transports. To

deepen our analysis, we studied the appraisals of a few selected cross-border

infrastructure investments.

We focused on large infrastructure investments that involve two or more countries, such

as tunnels and bridges. The case studies will focus on considerations and approaches in

the studied CBAs that are relevant for our main question.

There will also be an account of how user charges enter in the CBA, and how these can

be relevant for the final conclusions of a CBA. The user charges for the road sector are

regulated in the Eurovignette directive. The directive states that levying tolls on road

transport should be limited to only recover the infrastructure costs, including mainly

construction, operating and maintenance costs,14 not to be profitable for the country.

However, the directive does allow for variation in the toll rates, if transparent and non-

discriminatory, to incorporate environmental damage, congestion, minimizing

infrastructure damage and road safety (European Parliament, 2006). The variation may

not, however, affect a weighted average toll related to the recovery of the infrastructure

costs (European Parliament, 2006).

When choosing case studies, we found that CBA reports are available for only a few of

these infrastructure investments. In some cases, no CBA was conducted prior to the

investment decision. In other cases, CBAs were conducted by private firms, limiting the

availability of reports. The lack of available material thus limited the selection of case

studies somewhat.

3.1 Fehmarn Belt (Germany/Denmark)

A fixed link between the Danish island of Lolland, and the German island of Fehmarn

has been discussed for a long time, as this strait has been considered a gap in the

infrastructure between Scandinavia and the rest of Europe. A fixed link in this region

would induce considerable travel time savings for both passengers and freight transport,

which are both expected to grow in the future (Femern, 2013a). Denmark has been the

driving force in the planning process, since Germany has e.g. feared that a fixed link

would lead to loss of jobs when the ferry traffic would be phased out and that the

environmental effects could be significant. In 2007, the two countries however decided

to build the link, either as a bridge or a tunnel. A few years later, it was concluded that a

tunnel was the best alternative, due to fewer constructions risks. The project has been

surrounded by a number of uncertainties, but in September 2013, Femern A/S15 initiated

the process of seeking the necessary permissions (Femern, 2013b).

The link will include a four-lane motorway and a double-track railway. Apart from the

link, the project also involves an extension and refurbishment of the adjacent roads and

railways. The tunnel will be a prioritized project within the TEN-T development. It is

estimated that the tunnel will be ready in 2020 (Transportministeriet, 2013).

14 “Tolls shall be based on the principle of the recovery of infrastructure cost only. Specifically the

weighted average tolls shall be related to the construction costs and the costs of operating, maintaining

and developing the infrastructure network concerned. The weighted average tolls may also include a

return on capital or profit margin based on market conditions” (European Parliament, p. 13, 2006). 15 Company appointed and fully owned by the Danish Transport Ministry.

24 VTI rapport 798

The link will yield considerable travel time savings, and the (land-based) travel distance

between Denmark and Germany will be shortened by 160 km. For freight trains, the

travel time will be reduced by 3.5 hours, and passenger trains, cars and trucks will save

approximately 1 hour (Transportministeriet, 2013). According to one study,

approximately one-fourth of the utility of the time savings from the shortened travel

route will benefit actors in other countries than Germany and Denmark (Danish

Ministry of Transport 2004).

An additional gain for Denmark is that the link will free up some railway capacity on

the busy railway line between Sjaelland, Fyn and Jutland. As the ferry traffic is phased

out, CO2 emissions are also estimated to go down slightly (Transportministeriet, 2013).

Having the strongest interests in the link, Denmark carries most of the financial

responsibility for the building of the tunnel, as well as for connecting infrastructure on

the Danish side (Schade, 2013). Revenues from the tunnel tolls will also go to Denmark,

and will be used to pay off the investment costs. Germany pays only for the connections

on the German side (Transportministeriet, 2013). As Germany lately has expressed

concern about the unstable financial situation in Europe, parts of the investments on the

German side have been postponed (Politiken, 2011).

3.1.1 CBA

The construction of a fixed link between Denmark and Germany is interesting for

several reasons. Since it connects two different countries, it is interesting to see how the

user benefits are allocated between the countries. Since Denmark has a considerable

amount of transit traffic to and from Scandinavia, it is also interesting to see how the

benefits have been allocated to nearby countries. A number of reports on different

perspectives of the link have been published. Among these are a CBA published by the

consultancy firm COWI in cooperation with the Danish Ministry of Transport (COWI,

2004). Further, there are other reports on the regional dynamic and strategic effects of

the regions surrounding the fixed link. The CBA from COWI will be of main interest

for the purpose of our study.

The CBA that was the basis for the decision to build the link is somewhat unique in

considering the user benefit allocation for other countries than those directly affected by

the link. The CBA is based on three geographical perspectives; Denmark, Denmark and

Germany together, and all countries (COWI, 2004). The third, international perspective

is rare in CBA. In fact, we have not found any other case with this kind of application of

CBA measures. The CBA sets off in a reference case where no link is built. This case

then compared with two scenarios with a bridge or a tunnel, linking Denmark and

Germany.

The building of a fixed link will have large effects on traffic, and the quantification of

costs and benefits of the investment are to a great extent based on traffic volumes.

Assessing expected traffic volumes have thus been a fundamental part of the CBA. The

traffic model includes information on travel patterns, transport costs, user charges and

infrastructure characteristics. The focus is on eastern Denmark and northern Germany,

but the model also covers the European continent. There are a number of impacts which

are not quantified in the analysis, and the time value for goods is one of these effects. It

is however concluded that the non-quantified effects should be of minor importance.

(COWI, 2004)

VTI rapport 798 25

The economic analysis includes the following elements; investment costs, operating

costs, user benefits (time savings and reduced operating costs), environmental costs,

ticket revenues, consequences for other operators, as well as duties, subsidies and tax

distortion (COWI, 2004).

The CBA is based on Danish unit costs and values. It is thus assumed that the values for

passenger and freight traffic are the same for all nationalities. For freight, the

distribution of benefits between countries of origin and destination is assumed to be

equally divided between the countries included in the analysis.

Ticket revenues are included as a benefit in the economic analysis of the CBA, and they

accrue to the Danish government. Furthermore, EU subsidies are expected to cover

some of the financing costs (Roadtraffic-technology, 2013). Pricing and the cost of the

infrastructure has a great impact on the CBA results. In this case, the user charges can

bring back some of the consumer and producer surplus to the Danish part of the analysis

(which is the financing part).

Taking all countries into account, the CBA shows that the fixed link would give

considerable benefits for users due to time savings and reduced vehicle operating costs.

It is assumed that approximately one-fourth of the benefits in time savings, including

shorter freight train routes, can be allocated to users in other countries than Denmark

and Germany. When analysing Denmark and Germany separately, the user benefits

decreases. (COWI, 2004)

3.2 The Brenner Base Tunnel (Austria and Italy)

The Brenner Base Tunnel (BBT) has been discussed for several decades, and will form

an important part of the railway route Berlin/Munich-Verona/Milano-Palermo. This rail

route is one of the top priority projects within the EU programme TEN-T, aiming at

establishing an efficient multimodal transport infrastructure in Europe (Schade et al.,

2013). The BBT will be a 55 km long railway tunnel connecting Austria and Italy, from

Innsbruck to Fortezza. The tunnel is envisioned mainly for heavy freight across the Alps

and is currently planned to open in 2025 (BBT, 2013).

According to recent plans, the construction costs are divided equally between Austria

and Italy, apart from EU co-funding of approximately 30 % (Schade et al., 2013).

3.2.1. CBA

Several CBAs have been conducted for this tunnel. A CBA from 2007 indicates that the

investment for the tunnel will cost 8.6 million euro, and that the tunnel construction will

be beneficial with a benefit cost ratio (BCR) of 1.9 (Schade et al., 2013).16. The most

recent publicly available CBA is from 2013. This CBA takes the benefits during the

building phase and the operating phase into account, but only the effects expected

during the building phase are quantified and hence a BCR is not calculated

(Brennerbahn, 2013). The reason for this is that the effects during the about 150-year

operation phase are fraught with a lot of uncertainties when it comes to the transport

forecasts and the capacity of the single track sections of the TEN-T corridor

Berlin/Munich – Verona/Palermo.

During the operation phase, the following benefits are expected:

16 This report on the CBA has, however, not been found by the authors of this report.

26 VTI rapport 798

a reduction of the travel time for passenger transports and freight transports

(halving of the travel time) - as the BBT will reduce the travel distance by 21

km.

an increase (doubling) of the net tonnes that can be transported since the number

of gradients will be reduced and 700 m long trains can be used instead of 400 m

long trains, and the capacity in terms of number of trains will increase

a shift from road to rail, which is a goal in EU’s White Paper

a reduction of air pollution and greenhouse gases, noise and traffic accidents, as

well as lower road maintenance costs due to the modal shift

a reduction of the transport costs via the integration of the BBT in the 2 200 km

long Berlin – Palermo rail corridor

a contribution to the goal of integration of the internal market in Europe.

The preliminary calculations carried out have been based on the European CBA

guidelines (HEATCO, 2006), the Austrian CBA guidelines (Fritz et al, 2012), and the

Swiss CBA guidelines for rail infrastructure projects (BAV, 2006). Since the user

benefits of the reduction of transport costs have not been quantified, they have neither

been allocated between the countries. Yet, there is a discussion in the report on the

welfare effects at a national (Italy/Austria) and more local (South Tyrol and Tyrol) level

for the building phase. It is also stated that the investment would stimulate the internal

EU market. There is no discussion on user charges or ticket revenues for this project.

(Brennerbahn, 2013)

3.3 Helsingborg – Helsingør (Sweden/Denmark)

The Øresund Bridge, connecting Copenhagen in Denmark and Malmö in Sweden, was

finalized in 2000. To facilitate further expansion of the region, several other

infrastructure investments are being discussed. One of them is a second fixed

connection between Denmark and Sweden between Helsinborg (Sweden) and Helsingør

(Denmark). This distance is 5 km, compared to the 16 km between Malmö and

Copenhagen. Today, the cities are connected by ferry. The suggested investment is to

instead build a tunnel. The aim is to enhance the economic growth in the Øresund

region, and to further integrate Denmark and Sweden. The planners have developed

several alternatives, of which four have been evaluated in a study by IBU-Øresund

(2010). These are stated in Table 1.

Table 1 Alternatives for the Helsingborg – Helsingør tunnel

Alternative Description

Alternative 1 (HH 0.2) Tunnel for passenger train

Alternative 2 (HH 4.2) Tunnel for passenger train + double-lane for road

vehicles

Alternative 3 (HH 4.2.1) Tunnel for passenger train + for freight train +

double-lane for road vehicles

Alternative 4 (HH 2.2.1) Tunnel for passenger train + for freight train +

single-lane for road vehicles

Source: IBU-Øresund, 2010.

VTI rapport 798 27

3.3.1 CBA

In the CBA report, the infrastructure limit is set to coast-to-coast, hence the connecting

infrastructure on both sides of the tunnel is not included. To simplify the analysis, it is

based on Danish values only, instead of including values from both countries. Included

in the CBA are the costs for investment, operation and maintenance, time savings,

vehicle operating costs, environmental impact and revenues from ticket sales (IBU-

Øresund, 2010) Ticket revenues are one of the larger benefits in the calculations. The

revenues depend on the forecasted transport flows, which are uncertain. However, there

is no word on when the costs can be expected to be recovered.

Transit traffic is addressed since it constitutes the majority of transport flows, at least

for freight trains. Hence, the main benefits in time savings will be attributed to non-

Danish sellers and buyers. There is no allocation of time savings in the CBA, but it is

argued that the average time values used from HEATCO (since no specific values for

Denmark are available) are more representative since it is an European average rather

than specific for Denmark (IBU-Øresund, 2010).

For externalities, only emissions to air are included; CO2, SO2, NOx, HC, CO and PM.

Other externalities are not included due to a lack of available trustworthy data. To

complement the CBA with the impacts in the town centres of Helsingør and

Helsingborg, as well as impacts for the accessibility and economic growth in the region,

a multi-criteria analysis (MCA) was conducted. By using a composite modelling

assessment (COSIMA17), a weighted total value of the CBA and MCA is generated. The

results show that all alternatives have a positive net present value (from the CBA) and

total value (from the COSIMA). The order of the different alternatives does however

change. Only using the CBA, alternative 4 is ranked as the most profitable. When

combining the CBA and MCA, however, alternative 4 drops to third place and

alternative 1 is ranked first (IBU-Øresund, 2010).

3.4 Summary of case studies

The three selected case studies are all large infrastructure projects with the aim to

connect countries within the EU.

The Fehmarn Belt fixed link is a large and somewhat controversial infrastructure project

that will join Denmark and Germany by an immersed tunnel for rail and road traffic.

Since Denmark has a large amount of transit traffic to and from other Scandinavian

countries, the tunnel will obviously be of great importance also to other countries than

the two linked by the tunnel. In this project, the CBA has focused on user benefits for

other countries than just Denmark and Germany, which makes this an interesting project

for the purpose of the present study.

In the case of the Brennero Base Tunnel, which connects Austria and Italy and aims at

improving the rail freight through the Alps, it is argued that user benefits will be gained

at a larger regional level. However, they are not allocated among the different countries.

For the planned tunnel between Denmark and Sweden, transit is also an important part

of the transport flows. A regional perspective is assumed, but many simplifications have

been assumed in the CBA. Hence there is no allocation of the benefits from time

savings or operating cost reductions for freight transports.

17 The COSIMA model is further described in Salling et al. (2006).

28 VTI rapport 798

Ticket revenues constitute important benefits in the CBAs for the Fehmarn Belt

connection and the Helsingborg-Helsingør tunnel. However, there are no references to

how long the cost recovery period might be.

To conclude the section on case studies, it is noteworthy that there are so few CBAs

available for larger infrastructure investments in the EU. It seems that either a CBA has

not been conducted or a CBA was conducted by consultancy firms and did not result in

a publicly available report. In the case studies we have found, CBAs have only been

available in other languages than English, which makes finding and interpreting

relevant documents difficult. This lack of available CBA material seems peculiar

considering that the EU requires a CBA to be conducted prior to applying for EU

funding of infrastructure investments. The difficulties in getting a hold of CBAs are also

concluded in an assessment of the TEN-T projects’ investments and costs (Schade et al.,

2013).

VTI rapport 798 29

4 Discussion and conclusions

This project has focused on how user benefits in the form of reduced time and transport

costs, following infrastructure investments affecting international freight transport,

should be allocated between countries in a CBA. With the aid of the scientific literature,

existing national guidelines and a few case studies, the aim was to present a general

view of user benefits are allocated today.

The current Swedish CBA guidelines recommend that when infrastructure investments

give rise to user benefits for other countries than Sweden, only half of the benefits

should be allocated to Sweden if the project in question has major impacts on cross-

border traffic. It is not clear if this recommendation rests on a scientific basis, since

there is no such reference in the guidelines. Further, it is questionable why an

international perspective is relevant for this particular issue and not for others. The

Swedish CBA guidelines contain recommendations on a number of parameters, but it is

only when it comes to user benefits that an international perspective is encouraged. A

more consistent approach would be to maintain an international perspective also when it

comes to other areas, such as emissions of air pollutants and CO2. The argumentation

for the example of airborne emissions and CO2 is that the legal abatement responsibility

of Sweden is within national borders.

The literature review indicated that allocation of user benefits between several countries

is a rather unexplored area in the CBA literature (for freight transport). The few

available articles, however, indicate that the choice of allocation strategies can have a

significant impact on the profitability of infrastructure measures. A more thorough

analysis of the method discussed in the literature review can be conducted if a second

stage of this project is realized.

To complement the rather scarce scientific literature, the national CBA guidelines in 13

countries were reviewed. The review showed that the issue of how to allocate user

benefits when infrastructure investments affect several countries has only been

discussed in a few of the guidelines. Only in Finland and Sweden has this discussion led

to specific recommendations on how to allocate user benefits between countries. The

discussions in Finland and Sweden have their origins in the maritime sector. Since a

large share of international transports occur by sea, the issue of allocating user benefits

and costs often occurs in the analyses of for example fairway investments. Questions

concerning allocation of user benefits and costs have also been addressed in the U.S.

based on investments for maritime transports. Another example of addressing user

benefits can be found in the German guidelines. As mentioned earlier the guidelines

allows a mark-up of up to 10 % of time and cost savings, for infrastructure measures

that are important for border crossing transports.

It appears in some of the national guidelines that the issue of cross-border transports is

not relevant for most investments, e.g. in the case of the UK. The UK guidelines

conclude that for most infrastructure investments, the costs and benefits for non-UK

actors are insignificant and it is therefore not reasonable to spend resources on

identifying and quantifying these costs and benefits. The Canadian guidelines

recommend that user benefits for non-Canadian residents be included as well, referring

to principles of reciprocity and difficulties to attain sufficient data to separate national

and international user benefits. It is worth repeating that in practice, in Swedish CBAs

(and also in other countries) all transports within the national territory are included and

foreign traffic is not separated. However, the allocation issue can be relevant in the case

of national infrastructure investments as well. This concerns national infrastructure with

30 VTI rapport 798

a major impact on national imports and/or exports, i.e. with a high share of cross-border

freight transports. This is illustrated in the beginning of this report with the fairway

investments that allow larger ships to call the port of Hargshamn, which has led to

decreased transport costs for industry, and with the investments in the Swedish rail

infrastructure, which enables the use of longer trains for Swedish exports. The example

of the port of Hargshamn shows that alternative approaches to the Swedish CBA

guidelines are possible. Here it is also important to note that investments in the maritime

infrastructure are often financed through user fees, while other infrastructure

investments usually are financed through taxes.

In all the national guidelines reviewed, consideration of cost and benefits is generally

limited to the national territory and residents. This is sometimes expressed explicitly in

the guidelines, and in some cases only implied. It is for example stated in several of the

guidelines that since most measures are financed by the taxpayers of the country, CBAs

should focus on the impact on them. The EU guidelines emphasize that each project

should be analysed from a relevant geographical perspective, e.g. local, national, or

even global.

The compilation of national guidelines indicates that allocation of user benefits between

countries affected by infrastructure measures is seen as a peripheral issue. When it

comes to transnational infrastructure projects, we expected to see that this issue would

receive some focus. The allocation issue should be relevant in the planning of major

transnational infrastructure projects, especially when they are aimed at integrating

different countries with each other and investment costs are shared, like in the

connection between Helsingborg and Helsingør. Interestingly, it was first of all difficult

to get hold of the CBAs of these kinds of projects, even though they are required for EU

funding. Further, only in the case of the Fehmarn Belt fixed link could we find a

broader discussion and an attempt to allocate the user benefits from freight transport

between several countries.

To summarize, all three parts of this study indicate that the issue of allocation of user

benefits has not frequently been addressed. At the same time, there is an increasing

focus on international corridors in policy discussions at the national and European

levels. This raises the question of why this issue has not yet been more frequently

explored and why it is not highlighted more explicitly in national and international

guidelines, such as the ones from the EU. One reason could be that the national

guidelines are mainly constructed in a national perspective, with the focus on national

investments financed with taxes; hence the costs and benefits of main interest are the

ones affecting the taxpayers. Yet from a regional EU perspective it has been addressed

in the sense that all countries are responsible to individually defend their investment

decisions through a CBA and not through a CBA that includes an overall perspective.

Another reason for not allocating the benefits could be that it affects the benefit cost

ratio negatively if parts of the benefits are allocated to other countries, hence making

projects with high impact on international transports less profitable. At the same time,

organisations such as the EU have a political objective to improve efficiency for

international transport to increase the accessibility.

The conclusion from our study shows that, to our knowledge, there is neither any

country from where a benefit transfer of a well-founded allocation method could be

evaluated, nor any strong recommendations or straightforward theoretical methods in

the literature, with the exception of a first suggestion by Fosgerau and Buus Kristensen

(2005).

VTI rapport 798 31

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VTI, Statens väg- och transportforskningsinstitut, är ett oberoende och internationellt framstående forskningsinstitut inom transportsektorn. Huvuduppgiften är att bedriva forskning och utveckling kring infrastruktur, trafik och transporter. Kvalitetssystemet och miljöledningssystemet är ISO-certifierat enligt ISO 9001 respektive 14001. Vissa provningsmetoder är dessutom ackrediterade av Swedac. VTI har omkring 200 medarbetare och finns i Linköping (huvudkontor), Stockholm, Göteborg, Borlänge och Lund.

The Swedish National Road and Transport Research Institute (VTI), is an independent and internationally prominent research institute in the transport sector. Its principal task is to conduct research and development related to infrastructure, traffic and transport. The institute holds the quality management systems certificate ISO 9001 and the environmental management systems certificate ISO 14001. Some of its test methods are also certified by Swedac. VTI has about 200 employees and is located in Linköping (head office), Stockholm, Gothenburg, Borlänge and Lund.

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